Delhi-NCR appears in the top 10 list of logistics markets in Asia Pacific in terms of annual rental growth in H1 2024

Knight Frank’s Asia Pacific Logistics report found that the Asia Pacific (APAC) logistics market witnessed 2.4% year-on-year rental growth, a significant slowdown from the 6.2% increase in H1 2023. The study found that Delhi – NCR (3.0%) witnessed above-regional average rental growth, while Mumbai (2.3%) and Bengaluru (2.3%) were marginally below the regional growth rate.

In addition, all three Indian markets are witnessing stable rental forecasts for the next six months due to continued demand for warehousing and logistics space across the country.

Since the pandemic, rents in the Indian warehouse market have increased significantly, driven by a surge in tenant demand that reached record highs by FY2023. Although tenant activity has slowed since then, rental growth in Bengaluru, Mumbai and NCR continued in H1 2024 and remained at the levels seen at the end of H1 2023. However, increased vacancy rates in NCR and Bengaluru due to speculative developments could potentially dampen rental growth in these areas. Nevertheless, the combination of high development costs and strong demand from the manufacturing and 3PL sectors is expected to sustain rental levels for the remainder of 2024.

Delhi-NCR ranks 8th in the Asia Pacific logistics market in terms of year-on-year rental growth. At Rs 20.80 per sq ft per month, rents in the city grew by 3.0% year-on-year. The vacancy rate in the market currently stands at 15.7%.

Mumbai ranks 11th in the Asia Pacific logistics market in terms of annual rental growth. With a year-on-year growth of 2.3%, rents in the city are now at Rs 23.60 per square foot per month. The vacancy rate has also fallen to 9.4% in the first half of 2024 from 10.3% last year.

Bengaluru drops six places to rank 12th in the Asia Pacific logistics market based on annual rental growth in H1 2024. Rents in the city increased 2.3% year-on-year to Rs 22.00/sq ft/month. The vacancy rate was 21.1% in H1 2024.

Although the Asia-Pacific (APAC) logistics market saw rent increases in 13 of the 17 cities monitored in the first half of 2024, overall rent growth slowed due to difficult conditions in mainland China, particularly in Beijing and Shanghai.

The decline in business activity led to a 13.5% drop in rents and a vacancy rate of over 20%, prompting landlords to cut rents and offer shorter leases. In contrast, logistics rents in Singapore rose 6.7% in six months and 10.8% year-on-year, driven by strong manufacturing and a 10-month increase in the PMI. Forecasts for 2024 call for logistics rents to rise further by 3-5%.

APAC PRIME LOGISTICS RENTAL GROWTH IN H1 2024 and OUTLOOK

Source: Knight Frank Research

Warehouse transactions in eight major markets in India reached 23 million square feet (Mnsq ft) during the first half of 2024 (January – June 2024), with 55% of these transactions taking place in Prime space during this period.

Transaction activity was well distributed across markets. Mumbai, the leading market in India, accounted for 20% of total warehousing volumes, driven primarily by the 3PL sector. Delhi-NCR was the second most productive market, representing 17% of total warehousing space transacted in the top eight Indian cities during the period, with the 3PL and manufacturing sectors driving volumes.

In the first half of 2024, transaction volumes of companies in the manufacturing sector surpassed those of the 3PL sector. This is notable as the 3PL sector has historically been the mainstay of the Indian warehousing market. Companies in the manufacturing sector, including those in the automotive, energy and chemicals sectors, accounted for a staggering 36% of the total transaction volumes during this period.